Profiting From Failure

A global 23.8% decline in the number of mishandled bags last year is partly attributable to passengers' checking in less luggage to avoid extra fees, according to SITA, a transportation IT company. So not only did the airlines derive revenue from baggage fees, they also saved $460 million as fewer suitcases got left behind, put on the wrong flights, or lost. That was a big help for airlines in a year in which their overall losses totaled $9.4 billion, SITA says.

Seriously? As a frequent flyer I've actually wondered about this myself. Fortunately or unfortunately I travel an insane enough number of miles that I no longer am asked to pay baggage fees, so I was shocked when making reservations for my wife a couple weeks ago.

But let's look at this from the customer and process perspective.

The process has failure points because bags are lost. It may be a small number of bags, but still a major impact to the customer. So customers on critical missions are already incented to carry on their bags.

To further skew the statistics by lessening the opportunity for failure, airlines try to add an additional incentive for customers to carry on their bags. Those that don't pay a fee, increasing revenue.

But what happens?

A large cavernous region underneath the seats has increasing amounts of wasted space. Now I don't truly know this – perhaps there's another airline scheme to fill up that space with freight, thereby also increasing revenue. Perhaps, but doubtful.

However have you noticed what's happened to boarding times? As people carry on more and more luggage, boarding times have increased. Aggravation by both passengers and flight attendants has increased as more and more bags don't fit. Disembarking times have increased. Has anyone flown in Europe or Japan recently? Far, far fewer bags are carried on. Boarding is a breeze – although I can criticize the mayhem created by seemingly more airlines not having defined boarding procedures.

So what happens? Boarding times increase, the potential for late departures increase. How is that accommodated? Is the underlying root cause fixed? Nope, schedules are simply adjusted and flight times become longer. It now takes you longer to get from point A to C, usually via a B thanks to the batch-oriented hub and spoke system.

Comments

The airlines in Europe (I think all of them, but certainly the low-cost ones) limit the number of hand-carried items to just one – without that you’re right, the problem is moved on to a critical place and it makes overall performance worse.

The net effect of the two policies together however is to reduce variation and to improve boarding times – my regular Ryanair route has a 25 minute turnaround time and a good punctuality record. Moreover, I’m not subsidising the guy in front of me in the queue with a ton of stuff to check in.

So it’s not a completely crazy policy, but it does go to show that small changes can have negative consequences in the absence of attention to the whole system.

Customers must also be held accountable. It is unreasonable to ask for the physical constraints of an aircraft to be somehow magically changed so you can stow your 4′ x 4′ “carry-on” bag or “back pack” with enough clothes stuffed in it to keep you from having to do laundry on your six week trip. Yes, the airlines have incentivized the bad behavior by charging $15 and up, but even before that happened many, many travelers refused to check bags because they just did not want to wait the extra 20 minutes to pick them up at baggage claim. Or, they had an unreasonable fear that their bag would somehow be forever lost. Customers need to understand that even if they define value a certain way, they are responsible for working with the airline to prioritize that value along certain paths. Pack replaceable items in your checked bag and pay the $15 to check it. If you don’t fly enough to be able to check the bag for free, then $15 shouldn’t kill your wallet.

Today’s (Thurs) WSJ has an article on Spirit Airlines, which is planning to charge for carry-on bags. (Yes, you read that right.) The company points out that if they can reduce boarding times, they reduce gate delays, which means that they free up airplane capacity without having to buy more planes.

Am I the only one looking at the opportunity to save the airlines $460 million by fixing the root causes of lost bags? What if the lost baggage defect rate were 6 sigma? I can’t imagine it’s anything more than 3 sigma right now, costing a heck of a lot of money! Why aren’t the major airlines fixing these root causes, and then using that as a way to market themselves?

It just gets back to how an airline creates value for their customers. Nobody’s willing to spend $15 to check a bag in order to have a higher probability it will be lost, and then wait 20 minutes for it to come out of the plane.

This also goes back to the balloon theory… push the balloon and it pushes up somewhere else, often times unexpectedly.

The rate of “lost” luggage is 6 out of every 1,000 pieces. That’s 6/10 of 1%. And “lost” is defined as not showing up at the same airport at the same time as the customer. (That number includes bags that were never lost, but mishandled and were hand delivered to the customer’s hotel and/or home the next day.) So, for every 100 trips you get an even chance of a late or lost bag. For that, you clog the security gate with your “carry-on” bags, you stuff the overhead bins full, you complain when you have to valet check your huge roller bags planeside, and refuse to pony up the price of a bucket of KFC and check your bag? I am a very frequent flyer and I think the customers who behave this way are at least half of the problem.